Joint Response to the House Judiciary Committee on the State of Antitrust Law and Implications for Protecting Competition in Digital Markets

15 Pages Posted: 2 Jul 2020

See all articles by Jonathan B. Baker

Jonathan B. Baker

American University - Washington College of Law

Joseph Farrell

University of California, Berkeley - Department of Economics

Andrew I. Gavil

Howard University School of Law

Martin Gaynor

Carnegie Mellon University; National Bureau of Economic Research (NBER); Leverhulme Centre for Market and Public Organisation

Michael Kades

Washington Center for Equitable Growth

Michael L. Katz

University of California, Berkeley - Department of Economics; Haas School of Business

Gene Kimmelman

Public Knowledge

A. Douglas Melamed

Stanford Law School

Nancy L. Rose

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Steven C. Salop

Georgetown University Law Center

Fiona M. Scott Morton

Yale School of Management; National Bureau of Economic Research (NBER)

Carl Shapiro

University of California, Berkeley - Haas School of Business

Date Written: April 30, 2020

Abstract

Economic research establishes that market power is now a serious problem. Growing market power harms consumers and workers, slows innovation, and limits productivity growth. Market power is on the rise in a number of major industries, including, for example, airlines, brewing, and hospitals, where multiple horizontal mergers that were allowed to proceed without antitrust challenge have markedly increased concentration in important markets and facilitated the exercise of market power. Exclusionary conduct by dominant companies that stifles competition from actual and potential rivals — including nascent rivals with capabilities for challenging a dominant firm’s market power and firms with competing R&D efforts — impairs what is often the most important economic force creating competitive pressure for dominant firms. This concern exists in digital marketplaces. Platforms are often insulated from platform competition to a substantial extent by substantial scale economies in supply and demand (network effects) combined with customer switching costs.

Courts have contributed to increased monopoly power through decisions that have weakened the prohibitions against anticompetitive exclusionary conduct and anticompetitive mergers. The antitrust laws, as interpreted and enforced today, are inadequate to confront and deter growing market power in the U.S. economy and unnecessarily limit the ability of antitrust enforcers to address anticompetitive conduct. Many key antitrust precedents — particularly those precedents governing exclusionary conduct — rely on unsound economic theories or unsupported empirical claims about the competitive effects of certain practices. In part for this reason, the antitrust rules constructed by the courts reflect a systematically skewed error cost balance: they are too concerned to avoid both chilling procompetitive conduct and the high costs of litigation, and too dismissive of the costs of failing to deter harmful conduct. Excessively permissive precedents and unsound or unsupported economic claims have, in turn, encouraged overly cautious enforcement policies and overly demanding proof requirements and have discouraged government enforcers and private plaintiffs from bringing meritorious exclusionary conduct cases. The statement discusses a number of legal rules that are unsupported by or inconsistent with sound economic research that have contributed to overly permissive rules.

The signatories to this letter strongly believe that antitrust enforcement has become too lax, in large part because of the courts and that Congress must act to correct this problem. The statement suggests a number of reforms could be considered. We do not collectively or unanimously endorse any of these, though some of us have done so in other contexts. We do believe that Congress has a historic opportunity to identify adverse trends in judicial interpretation of the antitrust and correct problems—not just by overriding damaging precedents, but also by reshaping the antitrust laws more broadly to enhance deterrence of anticompetitive conduct.

Keywords: Antitrust Enforcement, Monopoly power, Antitrust Law, Digital Markets

JEL Classification: K2, K21, K23, K29, L4, L40, L41, L42, L44

Suggested Citation

Baker, Jonathan B. and Farrell, Joseph and Gavil, Andrew I. and Gaynor, Martin and Kades, Michael and Katz, Michael L. and Kimmelman, Gene and Melamed, Doug and Rose, Nancy L. and Salop, Steven C. and Scott Morton, Fiona M. and Shapiro, Carl, Joint Response to the House Judiciary Committee on the State of Antitrust Law and Implications for Protecting Competition in Digital Markets (April 30, 2020). Available at SSRN: https://ssrn.com/abstract=3632532

Jonathan B. Baker

American University - Washington College of Law ( email )

4300 Nebraska Avenue, NW
Washington, DC 20016
United States
202-274-4315 (Phone)

Joseph Farrell

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-9854 (Phone)
510-642-6615 (Fax)

Andrew I. Gavil

Howard University School of Law ( email )

2900 Van Ness St., N.W.
Washington, DC 20008
United States
202-806-8018 (Phone)
202-806-8567 (Fax)

Martin Gaynor

Carnegie Mellon University ( email )

H. John Heinz III School of Public Policy
and Management
Pittsburgh, PA 15213-3890
United States
412-268-7933 (Phone)
412-268-5338 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Leverhulme Centre for Market and Public Organisation

12 Priory Road
Bristol BS8 1TN
United Kingdom

Michael Kades (Contact Author)

Washington Center for Equitable Growth ( email )

Washington, DC
United States

HOME PAGE: http://https://equitablegrowth.org/

Michael L. Katz

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

Haas School of Business ( email )

Berkeley, CA 94720
United States

Gene Kimmelman

Public Knowledge ( email )

1818 N Street, NW
Suite 410
Washington, DC 20036
United States

Doug Melamed

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

Nancy L. Rose

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-318A
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Steven C. Salop

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9095 (Phone)
202-662-9497 (Fax)

Fiona M. Scott Morton

Yale School of Management ( email )

New Haven, CT 06520
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Carl Shapiro

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-5905 (Phone)

HOME PAGE: http://faculty.haas.berkeley.edu

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